Announcement of Two Credits Granted to Jordan on December 12, 1963

•• • INTERNATIONAL DEVELOPMENT ASSOCIATION 1818 H STREET, NW, WASHiNGTON 25, D. C. TELEFHONE EXECUTIVE 3-6360 IDA PRFBS RELEP.SE NO. 63/14 Subject: Ci-edits to Jordan Lecember 12, 1963 The International Development Association (IDA), an affiliate of' the World Bank, today extended two credits totaling $6.5 million to the Hashemite Kingdom of Jo~aan to develop urban water supplies and to increase agricultural production. A credit of $3.5 million will assist in improving and expanding the water sup- ply systems serving the Jerusalem area and three other urban centers in western Jo:tda.n -- the A.zraq-Irbid area and the towns of Zarqa and Nablus. The services to be provided will greatly ease the chronic water shortage which has seriously • affected living conditions in these towns. They will reduce the high incidence of w~ter-borne diseases, facilitate industrial growth and, in the case of the Jeru- sa,lem area, assist the further growth of tourism, a major source of income. The other credit, of $3 million, will provide additional resources for the lending program of the Agricultural Credit Corporation, a semi-autonomous govern- ment agency. Loans to cooperatives and individual farmers are an important part of a program being carried out by the Government to increase agricultural production and thereby lessen Jordan's dependence on imported foodstuffs which now account for nearly a third of all imports. Water Supply Pro,jects Over 40% of Jordan's population lives in towns -- an unusually high proportion for a predominantly agricultural country. This has been due mainly to the influx • of refugees, .since 1948, seeking employment which was not available in rural areas • One of the most pressing problems for municipal authorities has been the provision of water; in most of the towns, population has rapidly outgrown existing supplies  . ' - 2 - e..nd oaily per capita cons, unption is vecy low. h!gh priority to improving water supply systems. oa,de in December The Government therefore has given An IDA credit of $2 million was 1961 to improve the water supply system in the ca.pital city of • Amman, and today's credit of $3.5 million will assist similar projects in the four n~xt largest urban centers. The towns which will benefit from the projects have developed in different ways in the la.st 15 years. Af'ter several years of depression, the Jerusalem area bas become Jordan's most important tourist center. Its airport and a new highway to the Jordan Valley and Amman have provided new communications links. Althou.8!1 "the rate of population in.crease in Jerusalem and neighboring to'Wils has been slower than in other towns of Jordan, renewed growth is seen in the many new buildings an.i hotels which now link the adjacent urban areas of Jerusalem and Ramallah. In Zarqa, on the other hand, many small industries have sprung up in the last 10 years, migration from other parts of Jordan has trebled the population, • and the town has been completely transformed. The cities of Irbid and Nablus, even though somewhat remote from the economic activity centered on Amman, have nevertheless doubled in population since 1948. With Hebron they constitute the poles around which regional development can be stimulated to counterbalance the heavy concentration of population in Amman. None of the towns to be served by the new systems have a. nearby sizable source of usable surface water. Supplies now come from small springs and deep wells, a.nd the increase in population, together with the successive years of drought, have rendered them quite inadequate. Individual rain water cisterns provide a meager and uncertain additional supply. In each instance, the municipalities have to re- sort to rationing water and to hauling it by truck in the summer months of peak demand. The projects being assisted by the IDA credit involve the development of new water sources: new well fields will be developed for Zarqa and Nablus; water for •  - 3- • Irbi~. will be pumped 85 miles through an abandoned petroleum pipeline, serving Me.fraq, Husn, Ramtha and numerous small villages and facilities en route. Jerusalem area will be served by a pipeline about 16 miles long bringing water The from a large spring. The main components of the projects in each case involve collection works, transmission mains, pumping facilities, reservoirs and related f&cilities. They also include improvement or expansion of existing distribution systems. The projects will be carried out by the Central Water Authority, the Govern- mant agency responsible for the development of Jordan's water resources. The Cen- tral Water Authority will assist in the operation of the water systems; it will employ management consultants and :.iake their services available to the operating agencies. The IDA credit will provide funds for the employment of the management • consultants and of engineering consultants to design and supervise execution of the works. The projects are scheduled for completion in about three years. The total cost of the projects is estimated at the equivalent of $5,214,000. The IDA credit of $3.5 million will cover two-thirds of the total cost, including all the foreign exchange requirements. The remaining costs will be covered by loans from the Municipal Loan Fund of the Jordan Development Board and by revenues. The IDA credit is for a term of 50 years. Repayment of the principal will be- gin on May 15, 1974, after a ten-year period of grace. Thereafter, li of the prin- cipal will be repayable annually for 10 years and '!lo will be repayable annually for the final 30 years. The credit is free of interest, but a senrice charge of 3/4 of l'I, per annum on the amounts withdrawn and outstanding will be ma.de to meet IDA's administrative costs. The proceeds of the IDA credit will initially be relent by the Government of • Jordan to the Central Water Authority. After the works are completed the Authori"t:lf's financial liabilities Will be transferred to the operating agencies. The funds re- lent will be repaid to the Government over a period of 20 years, a:f'ter three years of grace, with interest at 41, per annum,.  . - 4 - P~orku.J.tu.ra.l Credit Program • Most of Jordan's total land a.rea is desert, and only about 1(Jfo is cultivated at any one time. Variations in rainfall from year to year and from one area to another give rise to wide fluctuations in the output of agricultural commodities. Average yields of' rainfed field crops are low because of recurrent crop failures.. Fruit and cli·.re trees give reasonable yields, but with heavy annual fluctuations. The large tumbers of livestock, mostly sheep and goats, are frequently decimated as a result of droughts and other adverse conditions. Despite unfavorable climatic conditions, agriculture is the mainstay of the economy and offers promising opportunities for development. It now provides employ- ment for more than half the working population a.nd, together with forestry, in normal crop years accounts for approximately 3orfo of the gross national product. • Intensified cropping on irrigated land brings a stable element into agricultural p~oduction, although the irrigated area is only about 110,000 acres. In the Jordan Va:ley irrigated. crops, particularly vegetables, give exceptional yields all year round. Although crop production considerably exceeds meat production, agriculture is fairly well diversified. A thriving modern poultry industry has developed in recent years and some dairy farms have been established. Output can be increased both through intensification of production on land under cuJ.tivation and through expanding agricultural area. If sustained growth of agricultural output is to be achieved, however, the Government's efforts to improve agricultural research, extension services and marketing facilities must be accom- panied by an expansion of agricultural credit facilities. The expanded lending program of the Agricultural Credit Corporation (ACC) made possible by the IDA credit will help to fill this need. ACC 'Will make loans for the reclamation and improve- ment of land, the establishment of permanent plantations, some irrigation, and on- farm development. There will also be modest investments in farm mechanization, in livestock production, and in farm and storage buildings. These measures will bring •  • • - 5 - a·0:n-t o.n increase in food crops and du.icy prodtcts for doracntic conDur.tpt::'...on and cf r.J: - port crops, mostly olives and vegetables. The increase in farmers' gross annual income resulting from the lending proc;ram should be about JDl million (US$2.6 mil- lion) wi ti1in 8 to 10 years. The 1\:,CTicultural Credit Corporation is the largest institutional sc:irce of agricultural investment credit in Jordan. Most of the Corporation's paid-in capital of approximately JD4 million (US$11.2 million) has been lent out, however, and at present ACC's resources for new loans are virtually restricted to recoverie3 on previous loans. The IDA credit of $3 million will enable ACC to ex- pand its lending for agricultural development, as part of a planned program which would require a total equivalent to $4.5 million over the next two years. To make its operations and :nanagement more effective, ACC will receive technical assistance • in accounting and lending proceduresj the IDA credit will include funds to pay the foreign exchange costs of foreign experts and of accounting equipment. The IDA credit of $3 million is for a term of 50 years. Repayment of the p~incipal will begin on Fe'bTuary 1, 1974, after a ten-year period of grace. There- after, le/a of the principal will be repayable annually for 10 years and 'J'/o will be repayable annually for the final 30 years. The credit is free of interest, but a service charge of 3/4 of 1% per annum on the amounts withdrawn and outstanding will be made to meet I~\'s administrative costs. The Govern.neut of Jordan will relend the proceeds of the credit to the Agri- cultural Credit Corporation which will repay the Government over a period of ten years, after a 10-year period of grace, with interest at 3-1/4% per annum. The Corporation will in turn relend the funds to farmers and agricultural enterprises • It at an interest rate of 5-1/4% per annum at maturities appropriate to individual projects.